The monoglyceride and glycerol-3-phosphate pathways for triglyceride biosynthesis has been examined in the microsomal fraction obtained from mucosal cells of tip and crypt origin. Both show a higher specific activity in tip cells compared to crypt cells. An inverse relationship has been found for the enzyme monoglyceride hydrolase in such preparations. We have suggested that phosphatidic phosphohydrolase (PAPase) is a regulatory enzyme in the synthesis of the glycerolphospholipids found in lung surfactant. This enzyme catalyzes the hydrolysis of both the phosphatidic acid and the phosphatidylglycerolphosphate in lung tissue and E. coli. The enzyme is localized in the lamellar body fraction obtained from lung type II cells. PAPase activity has been shown to be closely associated with lamellar bodies prepared from porcine lungs and amniotic fluid as well as purified surfactant. The secretion of surfactant by the type II cells has been shown to be mediated by the microtubule system.